Which of the Following Statements Is FALSE

question 57

Multiple Choice

Which of the following statements is FALSE?

• A) The yield to call (YTC) is the annual yield of a callable bond assuming that the bond is called at the earliest opportunity.
• B) Because the price of a callable bond is higher than the price of an otherwise identical non-callable bond, the yield to maturity of a callable bond will be lower than the yield to maturity for its non-callable counterpart.
• C) The assumption that underlies the yield calculation of a callable bond-that it will not be called-is not always realistic, so bond traders often quote the yield to call.
• D) We can think of the yield to maturity of a callable bond as the interest rate the bondholder receives if the bond is not called and repaid in full.

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Definitions:

Operating Cycle

The duration of time it takes for a company to buy inventory, sell the goods, and collect the receivables from the sale.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Cash Collections

Cash collections refer to the process of gathering all cash generated from sales, services, or receivables by a business during a specific period.

Minimum Cash Balance

Minimum cash balance is the lowest amount of cash a company aims to maintain in its accounts to ensure operational liquidity.